Tax Time

Once again it's tax time! Some of you love this time of year and others dread it. One way to cut down on your losses is to file your taxes free. Studiotax.com is an easy, reputable online filing system that won't cost you a penny! My husband and I have used this program for a few years now and love it. You will have to create an online account with the CRA (Canada Revenue Agency) first.

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Don't miss out on the following tax saving ideas:

Office in the home
Automobile expenses
Salaries paid to an assistant (your partner or child perhaps)
Supplies used to earn employment income

If you already are claiming the above expenses, don't forget to see if you qualify to claim the GST rebate for the GST you paid on deductible expenses.

If you are a waiter don't forget to report your tips!

If you work on the railroad, don't forget to claim your away from home expenses.

If you paid legal fees to collect salaries or wages you may be entitled to a deduction.
Line 104 Other employment income

If you received a taxable disability payment this year, you may be able to deduct all the premiums you paid into the plan since you started contributing to the plan. You may also elect to pay CPP premiums on other employment income not otherwise pensionable.
Line 113 Old Age Security

Don't miss out on the following tax saving ideas:
Claim the Age personal tax credit if you are over 65.
Check your T4AOAS slip to see if any tax has already been withheld.
Line 114 Canada and Quebec Pension Plan

Don't miss out on the following tax saving ideas:
Averaging the tax on lump sum CPP benefits received.
Reporting a death benefit on a separate trust return and pay less tax than on your personal return.
Line 119 Employment insurance benefits

Deduct any amounts repaid to EI during the year!
Line 120 Dividends from Canadian Corporation

Don't miss out on the following tax saving ideas:
Income splitting with your partner and children.
Investing the child tax benefit payments in your children's names.
Issuing shares to your partner or children in a family owned business.
Line 121 Interest and other investment income

Don't miss out on the following tax saving ideas: Income splitting with your partner and children.

Investing the child tax benefit payments in your children's names.

Deducting interest expense on money borrowed to purchase investments or invest in a family business.

Deducting the interest paid to purchase Canada Savings Bonds on the payroll plan at work.

Deducting your safe deposit box fees.

Deducting accounting fees paid to calculate the investment income reported on your tax return.

Deducting the interest paid on your margin account.

Review in detail the charges on your brokerage accounts for any possible interest or other fees paid that may be deductible. Look for accrued interest charges on bonds and similar investments purchased.
Line 126 Rental income

Claim all expenses incurred to earn rental income such as taxes, insurance, minor repairs and maintenance, interest expense and accounting fees paid to have the rental statement on your tax return prepared. Do not expense the cost of major repairs or additions to your property. Claim capital cost allowance to reduce your rental profit to zero.
Rental income is based on the accrual method and therefor any expenses incurred but not paid such as property taxes may non the less be claimed in the year to which they apply.
Consider purchasing rental property that will generate a profit in the name of the family member with the lowest net income, or consider income splitting with another family member.
Line 127 Taxable capital gains

Reduce any capital gains by any capital losses incurred in the year.
If you still have a capital gain at this point, claim any capital losses from previous years not otherwise deducted.
If you have an overall capital loss for the year, consider deducting these losses from any capital gains reported on your prior 3 year's income tax return or carry them forward until used..
Line 128 Support payments received

Some child support payments are not taxable!!!
There are joint elections that can be filed to make certain support payments not taxable.
Deduct any legal fees paid to enforce the payment of taxable support payments.
If you are single or unmarried you may be entitled to claim the equivalent to married exemption for on of your children.
Line 129 Registered retirement savings plans

Cash in RRSP's in amounts less that $5,000 at any one time to reduce the withholding tax to 10%. Of course the balance of the tax has to be paid when the tax return for the year is filed. Spousal RRSP's are a means of shifting the tax burden from one spouse to the other.
Line 130 Other income

The first $3,000 of certain scholarships and bursaries are not taxable.
You may be able to deduct expenses against a research grant you received this year.
Line 135 to 143 Self employed income

Self employed individuals are entitled to claim a host of expenses as long as they are reasonable and incurred to earn income. The most common are goods purchased for resale, office supplies, consulting fees, salaries and benefits, travel, insurance, equipment rental, bank charges and repairs and maintenance.
Often missed are the entertainment expense incurred to earn income such as meals, coffee, drinks in the bar and gifts.
If you home is your main place of employment you may also be entitled to claim a portion of your occupancy expenses such as rent, mortgage interest, property taxes, insurance, utilities, telephone and minor repairs and maintenance. The portion you claim varies based upon the amount of space and time the space is used for business.
If you use your car, you my be entitled to claim a reasonable portion of gas, repairs, lease, insurance, driver's license, interest on car loans, motor league, parking, washes and 30% per year on the cost of the vehicle used.
If you partner or other family members participate in the business a reasonable salary paid may be deducted.
This may be a great tax savings strategy depending upon your circumstances. You might also consider making another family member the owner or partner in the business in order to split income.
Its also important to know when its time to incorporate and what family members to include as shareholders. There are many tax saving strategies associated with incorporating a family business and its important to get proper professional advice.
Sometimes its possible to combine a family vacation with a business trip and expense a portion of the expenses.
Line 208 Registered retirement savings plan

Consider making your RRSP contributions now, but save claiming the deduction for when you are in a higher tax bracket.
Consider making spousal RRSP contributions.
Make an excess contribution of $2,000, but remember you may never have more than a $2,000 excess contribution at any time.
Make your RRSP contribution early in the year to take advantage of the tax free accumulation of earnings.
File income tax returns no matter how low your earned income is or how young you are to start accumulating contribution room.
If you are short on cash, consider transferring certain existing asset to your RRSP in order to obtain an RRSP deduction.
If your income will be nil or significantly less next year, buy an RRSP before March 1st., and cash it in one day later.
The contribution will be deductible this year at your marginal tax rate and taxable next year at your new marginal tax rate .
Line 212 Annual union and professional dues

If your employer is registered for GST and you pay GST on your union dues, you can get this GST back by completing form GST 370 and making a claim on line 457.
Check your T4 to see how much you paid in union dues or refer to separate receipts issued by your union.
Line 214 Child care expenses

Lunch programs and after school programs qualify as day care expenses.
Certain sports schools and camps also qualify as day care.
Line 217 Business investment loss

Unpaid funds loaned to a family corporation my qualify as business investment loss.
You may not even know that you have an existing "shareholder's loan" unless you have completed your corporations final set of financial statements and corporation income tax return. If so, take a look at the balance sheet and give us a call.
Line 219 Moving expenses

This expense can really add up fast...especially when you may be able to claim real estate fees and legal fees on the sale and purchase of a home.
Amounts not claimed in one year may be carried forward one year.
Students may also be able to claim moving expenses.
Line 221 Carrying charges and interest expense

See tips under line 120 and 121
Line 229 Other employment expenses

See tips under line 101
Line 252 Non capital losses of other years

Contact the Canada Customs and Revenue Agency and ask for a printout of your carry forward items. You might have a loss from a prior year that you forgot to claim.
Line 255 Northern Residents Deduction

Don't miss out on the following tax savings ideas: If you live in a prescribed northern zone, see if you qualify to claim this deduction.
Also if there is a taxable benefit on your T4 for travel in a prescribed zone, you may be entitled to deduct all or a part of this from your income. This includes travel for you and your family for 2 trips and all other trips taken for medical purposes.
Line 301 Age amount

You maybe able to transfer any unused amount to you spouse.
Line 305 Equivalent to spouse

You may qualify for this deduction if you were single, divorced, separated or widowed "at any time" in the year and you supported a dependent.
Dependents include your children, your parents or any other relative.
Adopted children need not be legally adopted.
Line 308
Canada Pension Plan contributions through employment

Often you have over contributed to the plan and if so you are entitled to get the overpayment refunded.
Line 312 Employment Insurance premiums

Like CPP you may have over contributed to this plan. Claim the overpayment on your income tax return.
Line 314 Pension income amount

If you do not need this deduction transfer the unused amount to your spouse.
Basically the first $1,000 of periodic pension plan is tax free for you and your spouse
Line 315 Caregiver amount

This credit is new and you may not know you qualify. If you are the caregiver of a relative who lived with you and who is over 18 and dependent on you because of an infirmity. Their income must be less than a qualifying amount.
Line 316 Disability amount

This deduction is transferable to your spouse if you don't need it to reduce your net income to zero.
Canada Customs and Revenue Agency is a stickler on this one, so be sure your form T2201 is filled out correctly by your physician.
Check this deduction out if you or your spouse are "markedly restricted" in your daily living activities such as walking, talking, seeing, or mental function.
Line 318
Disability amount transferred from other dependant

Unused disability amounts from a dependant may be transferred to you under certain circumstances.
Line 319 Interest on student loans

It may be beneficial to save this deduction for a future year when you are taxable or in a higher tax bracket. Maximum carry forward is 5 years.
Your dependant or spouse may also transfer this amount to you if not needed by them.
Don't forget about transferring tuition fees and education amounts as well.
Line 323 Tuition and education

Unused tuition fees may either be carried forward or transferred to a parent or spouse.
The education amount may also be transferred or carried forward.
Both full time and part time students may claim the education deduction.
To make this claim you must have an official receipt.
Universities outside Canada also qualify.
Students can claim moving expenses under certain conditions.
Line 324 Tuition & Education amounts from child

Often your children do not need their tuition fees or education amount. If so they may be able to transfer to you... check it out.
It may also be more advantageous for the student to carry these amounts forward to a future year.
Line 326 Amounts transferred from your spouse

Several deduction may be transferred to you from your spouse if these deductions are not needed by them. They include age, pension disability, tuition and education amounts.
Line 330 Medical expenses

Combining medical expenses for the entire family and claiming them on one return may be more advantageous.
Medical may be claimed for any 12 month period ending in the year. It may be more advantageous for example to go from June to May when totaling your medical expenses.
Medical expenses include premiums paid at work for health and dental plans (but not insurance and disability).
Blue Cross and other health plans are also medical expenses.
Don't forget to include travel health insurance.
Under certain circumstances you may also be able to claim travel expenses as part of your medical expenses.
Don't forget about the refundable medical expense supplement on line 452.
Line 349 Charitable donations

Claiming your donations every 2nd 3rd 4th or 5th year may be more advantageous to you. When your total donations are more that $200, the credit is much higher, approximately 50% depending on your province of residence.
Combining your donations with your spouse may also be more advantageous than each claiming donations separately.